I am fascinated by the massive growth in mobile phone penetration globally. This must be one of the biggest social changes that humans were ever submitted to. I am sure that this social phenomena, will eventually impact the way that we trade and pay as well. This is what I am writing about. See disclaimer at the bottom of blog.

Thursday, June 23, 2011

Seeing that I have a lot of interest in mobile banking, I try and track what is happening as much as possible. I was therefore quite surprised when I learned of a new mobile banking service being launched in Uganda that I have never heard of before. The service launched by Centenary Bank and partially funded by US Aid aims to bring banking to 300 00 farmers in the northern part of Uganda. According to the article the project required investment of almost half a million dollars. (Read here).

It would be interesting to find out if they ever considered using mobile phones and deploying (much more cost effective) agent networks as has been proven to work in many deployments in the region. Just considering the status of some of the roads in the region, it would also be interesting to see the projected maintenance cost of the project.

Sunday, June 19, 2011

Standard Chartered recently announced the launch of Breeze - a brand associated with their mobile banking initiative. (Read here) Making use of the capabilities providing by UK solution provider, Monitise, this offering must be evaluated as it introduces an important new concept in mobile banking. Exclusively focussed on existing Standard Chartered clients, much of the focus is on providing a richer and more intuitive consumer experience.

In the past, mobile banking services were often evaluated on the basis of criteria like scope of service, security, scalability and accessibility. In preparing the launch of this service, the bank placed a lot of emphasis on making sure that the user experience will be a competitive advantage. The methodology used in developing and supporting the service was carefully considered. The result is a new look and feel and a fresh approach to how mobile banking can be presented.

It would be interesting to get feedback on penetration and usage. The results will help answer important questions such as if people will do more banking if they enjoy the experience.

Last year, the Zap mobile money service provided by Zain in Africa, received the award as the best mobile money service for the unbanked at the MWC in Barcelona (Read here). This year, the service won an innovation award at the same event for a virtual card product (Read here).

Since then a few things happened that could have an impact on the future of Zap. George Held (generally recognised as the main driver behind the roll-out of Zap in Zain) left to join Etisalat as the head of products. Furthermore the Africa operations of Zain (where the main roll-out of Zap was spearheaded) was sold to Airtel from India. All of the Zain operations in Africa has now been rebranded to Airtel and the business philosophy of the company has been changed to aggressively compete for marketshare.

As a result of these changes, all Zap money services were also rebranded as Airtel Money with immediate effect. The Zap brand literally disappeared overnight (Read here). The Zap brand was so powerful, that it is extremely difficult to kill as even in official websites of Airtel, it is still referred to as Zap (Read here)

I recently noted that Michael Joseph (the father of mPesa) participated in a forum on the topic of banking the unbanked (Read here). Many observers are asking if mobile phones can be used to bring previously unbanked people into the domain of electronic banking. Much is being said about it and it is analysed from different directions, but should we not just ask the simple question: "Is mobile banking really serving the poor?"

It seems that there are overwhelming evidence that it does (and not just in Kenya):

In a recent research paper prepared by CGAP, it was found that more than 40% of Easypaisa users in Pakistan live on less than $2.50 a day. (Read here). It was also found that almost have of the users of the service do not have a bank account.

Berg Insight research indicate that about 133 million people benefit from mobile banking services in emerging markets. (Read here). According to this research more than a billion dollars was remitted to mobile banking accounts in 2010.

The Boston Consulting Group recently produced a report highlighting the big progress that has been made (Read here). Big growth in the penetration of the unbanked community is projected.

So in summary, we must surely say: "Yes, mobile banking is definitely serving the poor". Much must still be done, but sometimes it is important to just reflect and to realise that we are on the right track.

Friday, June 17, 2011

Online banking in South Africa is much more secure because of the use of SMS to deliver one time passwords (OTP) to banking customers. Unfortunately, even this practice can be manipulated by criminals to intercept passwords. This was recently highlighted when it was reported that a Vodacom employee colluded with criminals to intercept the OTP's sent to customers. In the process fraud of R2.4 million (about $340 000) was committed. (Read here). The immediate question is if Vodacom is liable in any way for this damage and the answer is quite clearly: no.

The commercials and infrastructure that supports existing telecommunication services (the delivery of voice and data products), were never designed to cater for the additional liability of financial services. Many examples exist where banks have been held liable for fraud perpetrated on their networks (Read for instance here). Banks have to implement systems to cater for this, they have to price their products accordingly and take out insurance to achieve this. The question is if Mobile Operators understand these implications and if they are able (and willing) to act accordingly.

In the meantime, consumers have to be made aware that the protection that they may expect from utilising telecommunication infrastructure to secure their banking , are not as rigorous as they may think. This is demonstrated by a resent post on the Internet Security Awareness Portal (Read here).

Thursday, June 09, 2011

Mexico is such an important market from a mobile money perspective. The profile of the citizens, the proximity (and dependency on) a large remittance market and the big growth in mobile phones make this country one of the best candidate for the next big mobile money deployment. Not much has been achieved in the past years. With many false starts (and failures), have marked the early stages of mobile money in Mexico.

The big success of micro lending institutions to bring financial services to the lower income is an indication of the need that exist at the bottom of the pyramid and that fact that well-defined and managed services can be rolled-out to reach a large part of the population. Changes in the regulatory framework have made the possibility to roll-out more financial services grow. I have reported on this in a previous blog (Read here).

In a recent CGAP report a very good clue is given to why the rate of deployment is low. (Read here). None of the initiatives launched has been focused on growing the banking fraternity. Rather mobile banking initiatives have largely been focused on existing banked customers. This is really of extreme importance as the slow growth is not as a result of regulations, lack of technology etc., but because of a mindset that lower income customers are not worth the effort. What will change this mindset?

Wednesday, June 08, 2011

In the early days of mobile payments, I found the mobile payment application for parking in Estonia interesting (Read here). Paying for parking the way that I am used to, was always location-dependent... and still is where I live. You could only pay for your parking when you were actually, physically present at the parking space. Now, with mobile payments, location is taken out of the equation. The payer could be different to the parker and could be anywhere in the world!

Another implication of taking location-dependency out of the payment process, is that the role of payer and buyer can now be separated. It is not necessary now to send money (or a cheque) with the buyer as one could authorise a payment without having to be present.

The impact on business process and implication related to risks and disputes must be analysed carefully in order to unlock the real benefits. It is not possible to deploy everything immediately, but it is important to at least consider the implications. When thinking about mobile payment applications, it is worthwhile to break the paradigm that it is necessary that the payer should be present at the location where the transaction occurs.

So Google announced their wallet solution recently and it was a big event. Even people that does not know anything about payments asked me about it. The marketing budget and the ripples created by this announcement won't be replicated easily. Lots have been written about it and many opinions exist about the wallet. One that I particularly enjoyed reading is the following.

Many analysts talk about the relevance and how important this move is for the industry. Others predict that it "might" work or that it could have some impact in payments going forward, but nobody seems to be able to bring themselves to saying the obvious: "this will never work". It will be an expensive exercise by a corporation that can afford it. It will make many claims and rock the industry in many ways, but it will not be used by consumers en mass.

The reason for this is simple. Payments is an eco-system game. Many things must happen at the same time for it to become acceptable and it is actually a very delicate system built on trust. If any of the players in this system withdraws, or don't play according to the laws, then the thing does not work. And the problem with the Google Wallet is that many of the players will not play in this game. They may not say this up-front, but they will not participate in this big Google play. Some of the candidates that I think will not play are the banks (the issuers of the cards), players in the acquiring space (big merchants and merchant aggregation), mobile operators and the most important participant; the consumer.

The players that will play in the Google Wallet space will be the hackers and the fraudsters. Deploying a critical piece of payment software on a hyper-open platform is indeed a bold move.

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This is my personal blog. It is not my intention to distribute news that is available elsewhere, but rather comment on it or provide the reader with my own thoughts. Unless otherwise stated, the views expressed on this blog are mine alone. I expressly disclaim any and all liability of any kind or nature with respect to any act or omission based wholly or in part in reliance on anything contained on this blog. Any links that appear on this blog are purely for your information. I'm not making any representations as to their content or, in fact, any other matter concerning them. Follow all links at your own risk.